Slide 1: Interim Report Q3 2013
Interim Report Q3 2013 CEO Mika Seitovirta CFO Reinhard Florey November 1, 2013
Slide 2: Disclaimer
Disclaimer This presentation contains, or may be deemed to contain, statements that are not historical facts but forward-looking statements. Such forward-looking statements are based on the current plans, estimates and expectations of Outokumpu’s management based on information available to it on th
Slide 3: Today's attendees of Outokumpu
Today‘s attendees of Outokumpu Johanna Henttonen Mika Seitovirta Reinhard Florey SVP – Investor CEO CFO Relations 11/1/2013 3
Slide 4: Contents
Contents 1. Q3 overview and strategic priorities 2. Financial performance 3. Q4 outlook and guidance 11/1/2013 4
Slide 5: Q3 2013 overview
Q3 2013 overview • Strong efforts continued to significantly reduce working capital leading to a positive operating cash flow of EUR 124 million for Q3 • Synergy and P150 related savings already exceeded full year target • Financial performance of Calvert operations improving • Continued weak econom
Slide 6: Continued growth for stainless steel globally – Europe will decline in 2013
Continued growth for stainless steel globally– Europe will decline in 2013 +1% +2% +6% +5% +5% +5% +4% +3% -1% EMEA APAC AMERICAS +5% +4% +3% Orange = Change 2011-2012 Green = Forecast 2013 TOTAL WORLD Blue = Forecast 2014 Data source: SMR, October 2013 Real demand for total stainless (rolled & forg
Slide 7: New Outokumpu Strategy Roadmap
New Outokumpu Strategy Roadmap Restructuring + Growth = Perfor- mance New Transform Ensure Full integration Deliver on Ramp-up Expand Leverage Develop efficiency company financial and new synergies US presence Ferrochrome HPSA APAC projects structure stability culture Mill closures P150 project New
Slide 8: New EMEA industrial plan introduced Oct. 1, 2013
EMEA New EMEA industrial plan introduced industrial plan Oct. 1, 2013 • Acceleration of the melting capacity reduction in Germany to achieve an efficient production footprint in European stainless steel operations. o Planned closure of Bochum melt shop already during 2014. • Capacity optimization to
Slide 9: Overall savings expected to reach EUR 380 million in 2015
EMEA Overall savings expected to reach industrial plan EUR 380 million in 2015 Original synergy and P150 savings Revised expected savings after new EMEA plan 500 500 Original synergies* EMEA restructuring 450 450 P150 savings Original synergies adjusted** 400 400 P150 savings 350 350 EUR Million 300
Slide 10: Update: US ramp-up
Ramp-up US presence Update: US ramp-up • Improved profitability for BA Americas Key profitability levers for Americas business in Q3 due to ramp up and reversal of 1. Expanding product portfolio and customer base the inventory write-downs of Q2 2. Increasing capacity utilization • Ramp-up of the Cal
Slide 11: Update: Ferrochrome operations
Expand Ferrochrome Update: Ferrochrome operations • Unique low cost position as Europe’s only Outokumpu ferrochrome production ferrochrome producer with access to the only known chromite reserves in the EU 600 (1,000 tonnes) 500 • Ferrochrome production of at least 400,000 400 tonnes expected for 20
Slide 12: New pricing model DAS introduced for European distributors
New pricing model DAS introduced for Ensure financial stability European distributors Jan 1, 2014 -> Daily Alloy Surcharge (DAS) Positive aspects for… Valid for European distributor mill-customers • Faster reaction on raw material price changes Customer Base price fixed at order date • Customer
Slide 13: Update: Strategic reviews and Terni remedy process
Ensure Update: Strategic reviews and Terni remedy financial stability process - progressing according to plans VDM • Strategic review of the VDM unit continues as planned and is progressing well. Decisions are expected to be made by end of 2013. Nyby, Kloster and Dahlerbrück • Strategic review of Ny
Slide 14: Contents
Contents 1. Q3 overview and strategic priorities 2. Financial performance 3. Q4 outlook and guidance 11/1/2013 14
Slide 15: Further decrease in transaction prices
Further decrease in transaction prices Transaction prices 304 stainless steel (USD) 1 Base prices 304 stainless steel (EUR) 1 5,000 1,300 4,500 Europe Germany 4,000 USA 1,250 3,500 China 1,200 3,000 1,150 2,500 1,100 2,000 1,500 1,050 1,000 1,000 Jan Jan Jan Jan Jan Jan 2011 2012 2013 2011 2012 2013
Slide 16: Raw materials - Price development in 2013
Raw materials - Price development in 2013 19,000 Nickel1 1.4 Ferrochrome2 European contract Europe spot Q3’2013 U 18,000 30 Oct U 1.3 14 555 USD/t 1.125 USD/lb S S 17,000 1.2 D D / 16,000 / 1.1 t l 24 Oct o 15,000 b 1.0 0.89 USD/lb n 14,000 0.9 13,000 0.8 2013 Feb Mar Apr May Jun Jul Aug Sep Oct 201
Slide 17: Q3 overview
Q3 overview • Q3 2013 stainless steel deliveries declined Q3/12 by 1% to 647,000 tonnes compared to Q2 EUR million Q3/13 Q2/13 comparable 2013 • Q3 underlying EBIT was EUR -126 million; in Stainless steel 647 656 663 line with expectations deliveries 1) • Q3 EBIT includes EUR -1 million non- Sales 1
Slide 18: Sales and deliveries by Business Areas
Sales and deliveries by Business Areas Q3 2013 external sales by BA 1) Q3 2013 external stainless deliveries by BA 1,2) Group sales EUR 1.9 billion Group deliveries 647,000 tonnes EMEA 49% Americas 13% EMEA 55% Americas 19% APAC 6% HPSA 32% APAC 9% HPSA 17% 1) Split by BA are based on management est
Slide 19: EBITDA and EBIT by Business Areas
EBITDA and EBIT by Business Areas EBITDA excl. NRI 1) per Business Area EBIT excl. NRI 1) per Business Area EUR million EUR million 26 17 6 3 4 0 -0 -5 -10 -20 -31 -39 -68 -50 -87 -70 EMEA Americas APAC HPSA EMEA Americas APAC HPSA Q2/13 Q3/13 1) NRI= Non-recurring items 11/1/2013 19
Slide 20: LME nickel prices and net timing impacts
LME nickel prices and net timing impacts EUR million USD/tonne Timing gain/loss (EUR million) LME Nickel (USD/tonne) 60 22,000 Total timing effect impacted also by 40 EUR/USD rate and changes in prices of 20,000 other metals 20 18,000 0 16,000 -20 14,000 -40 12,000 -60 10,000 Q1/12 Q2/12 Q3/12 Q4/12
Slide 21: Positive operating cash flow driven by NWC release
Positive operating cash flow driven by NWC release Q3/13 Q2/13 EUR million Net cash from operating activities 124 -160 Net cash from investing activities -51 -54 Free cash flow 73 -214 Net cash from financing activities 46 256 Net change in cash and cash equivalents 119 42 • Positive cash flow of EU
Slide 22: Capital structure
Capital structure Q3/13 Q2/13 EUR million Net interest-bearing debt 2,981 3,041 Equity 2,261 2,522 Equity-to-assets ratio, % 25.0 26.2 Debt-to-equity ratio (gearing), % 131.8 120.6 • Net interest-bearing debt decreased to EUR 2,981 million mainly due to positive cash flow • Outokumpu’s gearing up to
Slide 23: Liquidity and maturity profile of debt
Liquidity and maturity profile of debt Debt maturities September 30, 2013, MEUR • Overall liquidity reserves of >EUR 1,600 900 million (June 30, 2013: approx. 1,400 EUR 800 million). The increase driven by the positive free cash flow 1,200 1,000 • New EUR 900 million committed revolving credit facil
Slide 24: Update synergy savings – EUR 69 million achieved in 9M 2013
Update synergy savings – Deliver on synergies EUR 69 million achieved in 9M 2013 Synergy savings over time (cumulative) 250 • EUR 69 million synergy savings 200 achieved in the first nine months of 200 150 2013, exceeding the target of EUR 50 150 million for 2013 100 69 75 50 50 • Annual synergy s
Slide 25: Further headcount reductions as announced
Deliver on synergies Further headcount reductions as announced Personnel at the end of reporting period 1) • New EMEA industrial plan 18,000 includes an additional reduction -558 of up-to 1,000 jobs 16,000 • New target is to reduce global headcount by 3,500 between 14,000 16,700 2013-2017 15,879 15,
Slide 26: P300: Target to reduce net working capital of EUR 300 million
P300: Target to reduce net working capital New efficiency programs of EUR 300 million by the end of 2014 Cash flow from working capital change 1) Inventory development (1,000 tonnes) 2) 300 1,000 300 200 300 800 100 237 150 150 600 0 -17 -70 9M 2013 2014 Jan- Feb Mar Apr May June July Aug Sep Q1 Q2
Slide 27: Contents
Contents 1. Q3 overview and strategic priorities 2. Financial performance 3. Q4 outlook and guidance 11/1/2013 27
Slide 28: Market to improve slightly in EMEA and remain stable in Americas in Q4 2013
Market to improve slightly in EMEA and remain stable in Americas in Q4 2013 EMEA total stainless steel real demand1) Americas total stainless steel real demand1) 1,000 tonnes 1,000 tonnes 2,000 1,000 2012 2013f 2012 2013f 1,900 950 1,800 900 1,700 850 1,600 800 1,500 750 1,400 700 1,300 650 1,200 60
Slide 29: Business and financial outlook – Q4 2013
Business and financial outlook – Q4 2013 • Outokumpu expects o No major improvement in the market demand for the rest of the year and overall visibility continues weak o Sequentially lower delivery volumes, some improvement in base prices and similar product mix as in the third quarter o The progres
Slide 30: Key targets updated
Key targets updated Capital expenditure expected to decline to approximately EUR 300 million in 2013 (FY 2012: EUR 821 Capex million). Management target is to push capital expenditure down further in 2014 towards EUR 250 million. Ferrochrome production targeted to be at least 400,000 tonnes in 2013
Slide 31: Transformation of Outokumpu – Good progress but more work to be done
Transformation of Outokumpu – Good progress but more work to be done On a solid path • Acceleration and growth of savings • Synergies and P150 materializing ahead of schedule • Acceleration in EMEA as per new industrial plan • Combined savings of EUR 380 million in 2015 • Continued strong focus on N
Slide 32: Q&A Thank you for your attention!
Q&A Thank you for your attention! 11/1/2013 32
Slide 33: Appendix
Appendix 11/1/2013 33
Slide 34: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.9.13 31.12.12 • Goodwill is at EUR 480 million Non-current assets (including the Inoxum transaction Intangible assets 618 629 goodwill of EUR 7 million). Property, plant and equipment 3,551 3,697 • Assets held for sale (EUR 1,212 Interest bearing assets 250 2
Slide 35: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.9.13 31.12.12 Total equity 2,261 2,952 • The total non-current interest Non-current liabilities bearing liabilities of EUR 3,301 million include the IB1) liabilities 3,301 2,974 ThyssenKrupp loan note of Deferred tax liabilities 86 90 EUR 1,26
Slide 36: Outokumpu global production - healthy balance between melting and finished
Outokumpu global production - healthy balance between melting and finished with planned closures (planned state end of 2015) Thousand tonnes 5 4 1.4 Capacity Reduction Balanced ! 3 0.4 0.4 Plate & Long 2 3.3 Hot Band White 1 2.3 Cold Rolled 0 Melting Finished products Melting capacity shown after Kr
Slide 37: Balanced stainless production structure
Balanced stainless production structure After the new EMEA industrial plan (planned state end of 2015) thousand tonnes million t Coil EMEA HPSA Coil Americas APAC Total Finland Germany 1) Sweden 1) UK & USA Calvert San Luis Potosí Shanghai Melting 2) 1,450 450 450 900 3.3 Hot Rolling 1,450 900 870 3
Slide 38: Balanced customer base across industries
Balanced customer base across industries Sales by customer segment Sales by end-customer segment Healthy balance between end-customer segments across both investment and consumer driven industries Other Consumer Distributors 12% goods & Medical 41% Heavy 17% industries 8% Automotive 9% Architecture,
Slide 39: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • New Outokumpu has a broad product High portfolio to serve all customers 2) Performan Other ce Alloys 4% • Significantly higher share of ferritic grades 1% leads into reduced sensitivity to Nickel price Duplex 4% volat
Slide 40: Cost analysis Q3 2013
Cost analysis Q3 2013 Operative cost components 1) 2) Comments • Raw materials account for around 60-65% of the total operative costs of the Group • Share of Ni from total raw material cost is around 60% • Share of Cr from total stainless raw material cost is around 15-20%, but due to the captive su
Slide 41: Industrial production as the major driver for stainless growth
Industrial production as the major driver for stainless growth… Growth p.a. Economic Index 2005=100 Industrial Production 2013 - 2017 Growth Prospects 200 180 Fundamental APAC 160 140 120 +5% growth 100 2011 2013 2015 2017 140 Recovery from Americas 120 +4% economic crisis and continued growth 100 2
Slide 42: Growing stainless consumption mainly in APAC
… leads to growing stainless consumption mainly in APAC, and to some extent in Americas and EMEA [Total stainless real demand in million tonnes] Ø Growth p.a. 35.9 2013-2015 33.9 32.4 31.4 30.2 27.5 +6% 24.8 23.3 21.2 22.1 20.2 APAC 18.6 3.7 +4% Americas 2.5 3.1 3.3 3.4 3.5 EMEA 6.4 6.9 7.0 6.9 7.1